Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Chapter 15, Problem 12C
To determine
Explain the manner Person Y reply to the president of Corporation S from financial reporting and ethical perspectives.
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First Link Services granted 5.8 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within five years. The common shares have a market price of $20 per share on the grant date of the restricted stock award. Ignoring taxes, what is the effect on earnings in the year after the shares are granted to executives?
FX Services granted 16.0 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within four years. The common shares have a market price of $9 per share on the grant date. Ignoring taxes, what is the effect on earnings in the year after the shares are granted to executives?
Note: Round your answer to 1 decimal place.
First Link Services granted 6 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within three years. The common shares have a market price of $24 per share on the grant date of the restricted stock award. 1. Ignoring taxes, what is the total compensation cost pertaining to the restricted shares?2. Ignoring taxes, what is the effect on earnings in the year after the shares are granted to executives?
Chapter 15 Solutions
Intermediate Accounting: Reporting And Analysis
Ch. 15 - Prob. 1GICh. 15 - Prob. 2GICh. 15 - What are the three components and the basic...Ch. 15 - List the various rights of a shareholder. Which do...Ch. 15 - What is the meaning of the following terms: (a)...Ch. 15 - Prob. 6GICh. 15 - Prob. 7GICh. 15 - How does preferred stock differ from common stock?Ch. 15 - What amount of the proceeds from the issuance of...Ch. 15 - Prob. 10GI
Ch. 15 - Prob. 11GICh. 15 - Prob. 12GICh. 15 - Prob. 13GICh. 15 - Prob. 14GICh. 15 - Prob. 15GICh. 15 - Prob. 16GICh. 15 - Prob. 17GICh. 15 - Prob. 18GICh. 15 - Prob. 19GICh. 15 - How is a preferred stock similar to a long-term...Ch. 15 - Prob. 21GICh. 15 - Prob. 22GICh. 15 - Prob. 23GICh. 15 - Prob. 24GICh. 15 - Prob. 25GICh. 15 - What additional disclosures about preferred and...Ch. 15 - Prob. 1MCCh. 15 - Cary Corporation has 50,000 shares of 10 par...Ch. 15 - What is the most likely effect of a stock split on...Ch. 15 - Prob. 4MCCh. 15 - Prob. 5MCCh. 15 - Prob. 6MCCh. 15 - Prob. 7MCCh. 15 - When treasury stock is purchased for cash at more...Ch. 15 - Preferred stock that may be retired by the...Ch. 15 - When treasury stock accounted for by the cost...Ch. 15 - Brown Corporation issues 800 shares of its 5 par...Ch. 15 - Heart Corporation entered into a subscription...Ch. 15 - Blue Corporation issues 200 packages of securities...Ch. 15 - Sun Corporation issues 500 shares of 8 par common...Ch. 15 - Next Level Morgan Corporation issues 500 packages...Ch. 15 - Prob. 6RECh. 15 - On January 1, 2019, Phoenix Corporation adopts a...Ch. 15 - On January 2, 2019, Brust Corporation grants its...Ch. 15 - Prob. 9RECh. 15 - Assume Cole Corporation originally issued 300...Ch. 15 - Violet Corporation issues 1,200 shares of 150 par...Ch. 15 - Assume that Lily Corporation has outstanding 1,500...Ch. 15 - Tulip Corporation uses the cost method to account...Ch. 15 - Par Value and No-Par Stock Issuance Caswell...Ch. 15 - Combined Sale of Stock Maxville Company issues 300...Ch. 15 - Sale of Stock with Bonds Pilsen Company issues 12%...Ch. 15 - Issuance of Stock for Land Putt Company issues 500...Ch. 15 - Prob. 5ECh. 15 - Prob. 6ECh. 15 - Prob. 7ECh. 15 - Prob. 8ECh. 15 - Restricted Share Units On January 2, 2019, Dekker...Ch. 15 - Prob. 10ECh. 15 - Convertible Preferred Stock On January 2, 2019,...Ch. 15 - Prob. 12ECh. 15 - Stock Rights with Preferred Stock Nelson...Ch. 15 - Various Journal Entries Lodi Company is authorized...Ch. 15 - Treasury Stock, Cost Method On January 1, Lorain...Ch. 15 - Contributed Capital Adams Companys records provide...Ch. 15 - Prob. 17ECh. 15 - Treasury Stock, Cost and Par Value Methods On...Ch. 15 - Treasury Stock, No Par Propst-Steele Production...Ch. 15 - Subscriptions On August 3, 2019, the date of...Ch. 15 - Prob. 2PCh. 15 - Prob. 3PCh. 15 - Prob. 4PCh. 15 - Prob. 5PCh. 15 - Prob. 6PCh. 15 - Issuances of Stock Cada Corporation is authorized...Ch. 15 - Issuances of Stock Epple Corporation is authorized...Ch. 15 - Comprehensive Young Corporation has been operating...Ch. 15 - Comprehensive The shareholders equity section of...Ch. 15 - Treasury Stock Analysis Ray Holt Corporation has...Ch. 15 - Comprehensive Byrd Companys Contributed Capital...Ch. 15 - Prob. 13PCh. 15 - Prob. 14PCh. 15 - Reconstruct Journal Entries At the end of its...Ch. 15 - Treasury Stock, Cost Method Bush-Caine Company...Ch. 15 - Prob. 17PCh. 15 - Prob. 1CCh. 15 - Prob. 2CCh. 15 - Prob. 3CCh. 15 - Capital Stock Capital stock is an important area...Ch. 15 - Treasury Stock A corporation sometimes engages in...Ch. 15 - Prob. 6CCh. 15 - Prob. 7CCh. 15 - Compensatory Share Option Plan Tom Twitlet,...Ch. 15 - Prob. 9CCh. 15 - Treasury Stock For numerous reasons, a corporation...Ch. 15 - Prob. 11CCh. 15 - Prob. 12CCh. 15 - Prob. 13CCh. 15 - Prob. 14C
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- Valuation of Assets and Stock A friend has come to you for advice. He states that he owns several shares of stock in a corporation. He has examined the most recent balance sheet of the corporation and has found that the common stock issued and outstanding totals 40,000 shares, and the market price per share is 25 on the balance sheet date. He is sure that the balance sheet must be in error because, in his words, the total assets are 1,100,000 and this current value should be the same as the 1,000,000 total value of the outstanding common stock. Required: Explain to your friend how the values of the various assets of the corporation typically are measured and reported on its balance sheet, and how the value of the 1,100,000 total assets is determined. Continue the discussion by explaining to your friend why the values of the assets and the stock are not the same.arrow_forwardPROBLEM 1 An entity grants 100 share options to each of its 500 employees. Each grant is conditional upon the employee working for the entity over the next three years. The entity estimates that the fair value of each share option is P20. On the basis of a weighted average probability, the entity estimates that 30% of employees will leave during the three-year period and therefore forfeit their rights to the share options.During Year 1, 25 employees leave. The entity revises its estimate of total employee departures over the three-year period from 25% to 20%. During Year 2, a further 27 employees leave. The entity revises its estimate of total employee departures over the three-year period from 20% to 15%. During Year 3, a further 20 employees leave. Hence, a total of 72 employees forfeited their rights to the share options during the three-year period. 1. The total shareholders’ equity at the end of Year 1 would have increased (decreased), as a result of the grant, by:…arrow_forwardKnowledge Check 01 On January 1, Year 1, Sterling Corporation issued stock options for 260,000 shares to its CEO. The options have an estimated fair value of $6 each. To provide additional incentive, the options are not exercisable unless revenue increases by 4% in three years. Sterling initially estimates that it is probable the goal will be achieved. What is compensation expense for Year 1?arrow_forward
- Accounting Witter House is a calendar-year firm with 470 million common shares outstanding throughout 2021 and 2022. As part of its executive compensation plan, at January 1, 2020, the company had issued 45 million executive stock options permitting executives to buy 45 million shares of stock for $12 within the next eight years, but not prior to January 1, 2023. The fair value of the options was estimated on the grant date to be $2 per option. In 2021, Witter House began granting employees stock awards rather than stock options as part of its equity compensation plans and granted 25 million restricted common shares to senior executives at January 1, 2021. The shares vest four years later. The fair value of the stock was $20 per share on the grant date. The average price of the common shares was $20 and $30 during 2021 and 2022, respectively. The stock options qualify as an incentive plan. The restricted stock does not. The company's net income was $320 million and $330 million in…arrow_forwardCheng/Hamm Incorporated developed a business strategy that uses stock options as a major compensation incentive for its top executives. On January 1, 2024, 23 million options were granted, each giving the executive owning them the right to acquire five $1 par common shares. The exercise price is the market price on the grant date – $30 per share ($150 per option). Options vest on January 1, 2028. They cannot be exercised before that date and will expire on December 31, 2030. The fair value of the 23 million options, estimated by an appropriate option pricing model, is $49 per option. Ignore income tax. Cheng/Hamm's compensation expense in 2024 for these stock options was: Note: Round your answer to nearest whole dollar amount.arrow_forwardDescription Ashleigh, a public limited company, has granted share options to its employees with a fair value of $6 million. The options vest in three years’ time. The Monte-Carlo model was used to value the options, and these estimates had been made: • Grant date (January 1, 20X4): estimate of employees leaving the entity during the vesting period—5% • January 1, 20X5: revision of estimate of employees leaving to 6% before vesting date • December 31, 20X6: actual employees leaving 5% A. What would be the expense charged in the income statement in Year to December 31, 20X4? (a) $6 million. (b) $2 million. (c) $1.90 million. (d) $5.70 million. B. Year to December 31, 20X5? (a) $1.90 million. (b) $1.88 million. (c) $2 million. (d) $3.78 million. million) C. Year to December 31, 20X6? (a) $1.90 million. (b) $1.88 million. (c) $2 million. (d) $1.92 million.arrow_forward
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- SSG Cycles manufactures and distributes motorcycle parts and supplies. Employees are offered a variety of share-based compensation plans. Under its nonqualified stock option plan, SSG granted options to key officers on January 1, 2016.The options permit holders to acquire 12 million of the company’s $1 par common shares for $11 within the next six years, but not before January 1, 2019 (the vesting date). The market price of the shares on the date of grant is $13 per share. The fair value of the 12 million options, estimated by an appropriate option pricing model, is $3 per option. Required: 1. Determine the total compensation cost pertaining to the incentive stock option plan. 2. Prepare the appropriate journal entries to record compensation expense on December 31, 2016, 2017, and 2018. 3. Record the exercise of the options if all of the options are exercised on May 11, 2020, when the market price is $14 per share.arrow_forwardRecording Stock Options: Issuance and Forfeiture Stacy Corporation offered a stock option incentive plan to six of its top executives. During the second year from the date of the grant, but prior to the permissible exercise date, one of the six executives resigned and accepted employment with a competitor. In accordance with the provisions of the incentive plan, the stock option award for the resigned executive lapsed. At the date of lapse, the relevant account balance for all six executives combined was Paid-in Capital—Stock Options, $810,000 (adjusted carrying amount). The requisite service period extends for three more years. The company's policy is to record forfeitures as incurred.arrow_forward
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